G.R. No. L-69243 November 22, 1985
CONTINENTAL LEAF TOBACCO (PHIL.) INC., petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT, HONORABLE RAFAEL T. MENDOZA, in his capacity as Presiding Judge, Regional Trial Court, Branch 135, Makati, Metro Manila, The Sheriff, Makati, and PENNEL COMMERCIAL COMPANY, INC., respondents.

FACTS

Respondent Pennel Commercial Co., Inc. filed a complaint for sum of money against petitioner Continental Leaf Tobacco, alleging non-payment of a P77,500.00 service fee for transporting container vans of tobacco. In its answer, the petitioner interposed a defense of compensation, claiming that due to the respondent’s gross negligence, fifty cases of tobacco valued at P163,216.00 were lost from the shipment, making both parties mutual debtors. The petitioner also filed a counterclaim for damages. After a pre-trial conference was reset to June 4, 1984, by agreement of the parties, neither the petitioner nor its counsel appeared on said date. The trial court, upon the respondent’s motion, declared the petitioner in default.
The trial court proceeded with unusual speed, receiving the respondent’s evidence ex parte on June 5, 1984, and rendering a judgment by default on June 6, 1984, ordering the petitioner to pay the principal obligation, interest, attorney’s fees, and costs. The petitioner received the order of default and the decision on June 8 and 11, 1984, respectively. It filed a motion to lift the order and set aside the decision, explaining that its counsel’s failure to appear was due to illness constituting excusable negligence. The trial court denied the motion. The petitioner then filed a petition for certiorari before the Intermediate Appellate Court, which dismissed it, ruling that the proper remedy was appeal, not certiorari.

ISSUE

Whether the Intermediate Appellate Court committed grave abuse of discretion in dismissing the petition for certiorari and upholding the trial court’s judgment by default.

RULING

The Supreme Court granted the petition, annulling the challenged orders and decision. The legal logic proceeds from the principle that while the general rule is that certiorari is not available when appeal is an adequate remedy, exceptions exist, and this case qualifies. A judgment by default is rendered without the defendant’s participation and is not based on the merits of the case. Courts must employ such a drastic remedy with thoughtful hesitation, as it can amount to a positive injustice, depriving a party of its right to due process. The records here raised suspicion, as the trial court acted with unusual haste, issuing the default order, holding a hearing, and rendering a decision within three consecutive days, even before the petitioner received the default order.
Crucially, the petitioner’s answer set forth a meritorious defense—the claim of compensation due to the alleged loss of goods—which, if proven, could extinguish or offset the respondent’s claim. This defense deserved a full hearing on the merits. Denying the petitioner its day in court under these circumstances, where a credible explanation for the non-appearance (counsel’s illness) was proffered and a substantial defense was pleaded, constituted a denial of due process. The availability of an appeal was not a sufficient remedy because an appeal would only review the ex parte evidence presented by the respondent, not the petitioner’s own evidence, which it was never allowed to present. Therefore, the appellate court’s rigid application of the rule on the availability of appeal amounted to grave abuse of discretion. The case was remanded to the trial court for further proceedings and reception of the petitioner’s evidence.